Fintech, it is Not New

Image circa late 1800s

If you think the idea of “fintech” is new, then you would be incorrect.

Technological advancement has driven financial service innovation throughout history, starting with carrier pigeons who would tip traders about the stock on incoming ships, right up to the digital network that creates a canopy of communication over Wall Street and around the world.

What makes fintech appear new is the advent of the internet. It’s widespread proliferation, and the extent of disruption that it facilitates, is unprecedented.

So let’s take a look at Fintech innovation since the internet’s inception:

• In 1994, Microsoft Money was introduced and included online banking in its personal finance software.
• By 1995 Charles Schwab introduced online trading, fuelling tremendous growth in client assets.
• 2006 saw Michael Sullivan coin the term ‘crowdfunding’, estimated to reach $34 billion in 2015.
• By 2008, companies including Betterment and Wealthfront launched ‘robo-advice’ offerings and these two firms will have over 100,000 clients and more than $5 billion in assets by the end of 2015.
• 2009 saw the introduction of peer-to-peer lending which has the potential to fundamentally disrupt banking around the world.
• And in 2009, Satoshi Nakamoto created Blockchain, a shared public ledger designed to facilitate the use of virtual currency, Bitcoins.

Another factor in the recent exponential growth in fintech, was the GFC. The distrust in the established system, especially in banks, primed the industry to be disrupted by new business models. A high value industry riddled with discontent has created the ideal environment for the fintech growth as is evident in Figure 1.

“The rapid pace of technological changes makes one thing clear; if you stand still you’re going to be left behind. This is seeing a surge in traditional financial services institutions, locally and globally, investing in technology innovation, rethinking their business models, and even collaborating with Fintech firms.” — KPMG Investing in the Future, 2014

While fintech is not new, now is an exciting time, a time of significant and disruptive change. The implications, for financial services firms and for consumers, should not be underestimated.

Image Credit: http://io9.com/photos-from-the-days-when-thousands-of-cables-crowded-t-1629961917

Originally published at h2blogspot.wordpress.com on November 9, 2015.